High noon in relations between IMF and Ukraine has matured

At the present time Ukraine is in the world limelight. The specific
character of the present situation is that the country happened to be at a
crossroads of external economic and political vectors. Decision making
concerning the line of further development by the country occupying
exceeding territory in the heart of Europe with a population of 45 million
people is a matter of great importance not only for Ukrainians but for the
whole world.
Finally defined its strategic choice, Ukraine faced serious difficulties.
On the one hand, it suffers from aggravated domestic economic situation
against the background of the global financial crisis and the slowdown in
global economy recovery, on the other hand – Ukraine is subject to
political and economic pressure from Russia. So, the situation is
dramatized. The country is unable to manage with ensuring stability of the
financial system. In this regard, Ukraine needs to attract foreign
financial resources ever more pressingly than ever before. Recent events
corroborates that Russia, irritated by European aspirations of Ukraine,
skillfully uses the uncertainty surrounding the renewal of cooperation
between international financial institutions and shatter to the maximum
the difficult economic situation in the country.
For the purpose to achieve its European integration goals, Kiev
essentially needs to attract credit resources of independent international
financial institutions. Country leaders are actively seeking such
opportunities in various areas. As a result, Ukraine is in a high need to
renew cooperation with the IMF on stand-by program. Opening a new credit
line will allow Kiev to reduce economic dependence from Russia, as well as
decrease the consequences of “trade” and “gas” wars initiated by Russia.
The IMF may support Ukraine at the first stage to absorb a strike from
close of Customs Union’s markets. The IMF loan will improve the economic
situation in the country supporting financial system. So, such lending a
helping hand will show the important signal to other foreign investors.
It is necessary to identify another important aspect. Renewal of
cooperation with the IMF will allow Ukraine not to seek other
opportunities to attract credit resources from potential borrowers such as
the state banking institutions in Russia, which, accordingly, will reduce
the influence of the Russian capital on the Ukrainian economy. From a
geopolitical point of view, it would be beneficial for both Europe and the
U.S. Otherwise, Ukraine may become dependent on the Russian leaders’
imperial ambitions.
Until now Ukraine has managed to maintain the image of fair borrower and
Kiev has performed all payments for credits without problems or lags.
Altogether, during the period of 21 year of cooperation, the IMF has
allocated $ 19.07 billion to Ukraine and has already got back $ 15.27
billion, accounting for 80% of total borrowings. Positive history of the
IMF’s loan repayment in the context of further negotiations may be
underlined as one of the significant arguments in favor of Ukraine.
However, if negotiations will not achieve a reasonable compromise on the
terms of the next loan in December in Kiev, it is likely that chance of
partial or complete default will rise significantly, which in its turn
endanger payments from previous tranches. As is known, Ukraine will have
to pay $ 8.2 billion on external borrowing next year, at a level of
reserves of 20.6 billion at the end of October 2014. Without external
assistance, on the background of an acute deficit it might not cope with
such payments.
Thus, considering the whole range of issues and their policy implications,
it is clear that, if the satraps and the top managers of the International
Monetary Fund continue to maintain their critical stance towards relief in
some credit terms, it should be expected an exacerbation of economic
crisis in many European countries. International financial institutions
and influential multinational companies that have invested heavily in the
financial market of Ukraine, in the event of crisis and inability to
service external debt of Ukraine (both sovereign and corporate) may suffer
serious losses.
In this situation, a refusal to cooperate with Ukraine will undermine the
credibility of the IMF as an institution of modernization of economics of
underdeveloped countries and cause irreparable damage to his reputation.
The lack of clear signals from the Fund's management about the possibility
of reaching a reasonable compromise in the negotiations with Kiev
endangers Ukrainian people’s choice, who demonstrated their commitment to
the values of European civilization. Rigidity and intransigence of IMF
only increased the imperial ambitions of the Kremlin. It will inevitably
resulted in the weakening of the EU and the U.S. positions which has
already in a difficult situation due to a failure in solving Syrian issue
and revelations of former NSA employee Edward Snowden recruited by
Russians.